TOPIX and TOPIX Sector Index Futures
TOPIX futures - function
Update : Nov. 21, 2011
(1) Providing a hedging tool
Many stocks are affected by global events that may have either a positive or negative impact on the economic well-being of the entire market. Such events affect more than one stock. This type of price variability is called systematic risk. TOPIX futures provide a means of managing this risk with a view to reducing it.
(2) Easier portfolio management
By using TOPIX futures portfolio managers can adjust their portfolios without having a large impact on the underlying stock market.
(3) New investment tools
TOPIX futures provide new investment tools, such as arbitrage and position trading.
(4) Enhanced liquidity of underlying stocks
Hedging and arbitrage trading can enhance the liquidity of underlying stocks, and help keep prices in 'proper alignment'.
(5) Price discovery
Prices in both futures and underlying stock markets tend to settle at levels that best reflect current forecasts of supply and demand conditions. Thus, prices in the futures market help predict future prices of underlying stocks.